As we end the quarter October -December 2016, we are happy to share the results of IndusWealth model portfolio.
Results for IndusWealth can be downloaded from the links below:
- Summary of the returns
- Portfolio performance summary
- Benchmark return calculations
- Transactions in the model portfolio
- Stock wise returns for the model portfolio
Journey So Far
It’s been 3 years since IndusWealth has been established. This is a quick recap of the journey so far.
We have taken an approach of investing every month and each month we invest in about 4 to 6 stocks. Expectation from each investment is that it beats NIFTY for the period we hold the security. Ideally, we would like to hold securities for very long time (hopefully forever!), only few stocks will satisfy that criteria. Our minimum holding period has been 18 months. Most of the stocks have been held for longer, with just 36-month history I think it premature to make any claims.
- In the last 36 months 185 buy decisions were made, 123 are beating NIFTY a win ratio of 66.5%.
- We are currently holding 82 stocks of which 52 are beating NIFTY a win ratio of 63.4%.
- In the last 36 months we are beating NIFTY in 31 months, a win ratio of 86%
- In model portfolio is 70.5% of the capital is beating NIFTY.
- Over the last 3 years investments have generated a net return of 41.4% this is an annualized return of 26.5%.
We are taking a statistical approach to investing and minor changes are being made to the investment process based on the learnings. So far, we can say that the results have been satisfactory. I try and remind myself constantly that all it takes to unravel results is a bit of overconfidence and overreach.
As we complete the 3 year milestone, I believe it is an opportune moment to offer another product. The plan is to offer a Small Cap focused fund. Starting January 2017, all investors who have more than Rs 1 crore invested with IndusWealth or are investing Rs 5 lakhs a month or more will be invited to participate. Small cap investments are inherently more risky (limited liquidity and potentially higher chance of capital loss) and hence an asset criteria to ensure suitability. The plan is to disclose overall results on the website and publish details of individual purchases only to the investors. Reason being, small caps have very little liquidity and it may not be in the investors interest to publish stock details on the website.
Last quarter has been tumultuous. Markets had significant volatility – some of these in response to global events like US presidential election, surprise attack on Pakistan by Indian forces, withdrawal of high denomination currency etc.
Markets have reversed most of the gains of the year. The silver lining is that the P/E is at 22 which is much better than 24. Long term investors can find more buying opportunities.
I hope you had a chance to read the article which discussed that investor who had invested monthly over a 3 year period and held on to those investments for a 5 year period will realize reasonable return. Here is a chart of the returns such an investor would realize.
In the long run stock markets have delivered satisfactory returns. But stock market returns have never been linear, markets have significant volatility. Markets and market participants respond emotionally to various incidents, often these reactions are not rational. Market volatility should not be confused with risk. Investment risk is the risk of permanent loss of capital, short term volatility due to market reactions is not a risk.
Markets reflect the underlying economy and its growth. As long as the underlying economy is robust volatility should be treated as an emotional response and not as a reflection of change in the underlying fundamentals.
Long term prospects of Indian markets and economy continue to be robust. As India’s per capital GDP increases (India is currently ranked 141), business will thrive and long term investors will benefit from the value creation process. Investors with long horizons should consider investing meaningful sums and be patient while the great compounding engine delivers results.
Wish you a happy new year.